Medicare, the US government health insurance programme covering around 68 million older and disabled people, was historically barred from negotiating medicine prices directly with manufacturers. That changed with the 2022 Inflation Reduction Act, which authorised negotiation for a small number of costly medicines. The new Most-Favoured-Nation policy goes considerably further, aligning Medicare payments for brand-name drugs with prices in comparable high-income countries, adjusted for purchasing power. Two pricing models underpin the approach: GLOBE, short for Global Benchmark for Efficient Drug Pricing, which covers medicines administered in hospitals and clinics, and GUARD, or Guarding US Medicare Against Rising Drug Costs, which covers medicines purchased at pharmacies. In their initial phase, both models would apply to a randomly selected 25 percent of Medicare beneficiaries over a five-year period.

The study, led by Professor Thomas Hwang of Brigham and Women’s Hospital, analysed 195 patented medicines that together account for 87.9 billion dollars of Medicare’s annual prescription drug spending, split between 32.7 billion dollars through GLOBE and 55.2 billion dollars through GUARD. Because manufacturers’ actual rebates and discounts are confidential, the researchers estimated Medicare’s net prices for each medicine and compared them with prices in the 19 reference countries named under the proposed rules. That list includes Australia, Austria, Belgium, Canada, Czechia, Denmark, France, Germany, Ireland, Israel, Italy, Japan, the Netherlands, Norway, South Korea, Spain, Sweden, Switzerland and the United Kingdom.

Without any exemptions, the researchers estimate the policy could cut Medicare spending by 5.2 billion dollars, or 16 percent, under GLOBE and 6.4 billion dollars, or 18 percent, under GUARD during its initial phase, which covers about a quarter of the Medicare programme. If the rules were expanded to all Medicare beneficiaries, those savings could rise to an estimated 21 billion dollars under GLOBE and 25.5 billion dollars under GUARD. The analysis found that the lowest international price used as a benchmark was on average 71 percent lower than what Medicare currently pays, with South Korea, Norway and Australia the most common countries referenced for setting prices.

The mechanism behind the projected global effects lies in the arithmetic of the benchmarking rule. Among the 138 medicines with available sales data, the estimated cut to Medicare spending was about 3.8 times bigger than that medicine’s total annual sales in the country used to set its US reference price. For about 73 percent of these medicines, 101 of 138, the estimated cut would exceed the medicine’s entire annual sales in that reference country. In other words, for most products, keeping prices low abroad would cost a manufacturer more in lost Medicare revenue than it earns from selling in that country altogether. The study concludes this creates a strong incentive to raise prices in reference countries or to make prices less visible to Medicare for referencing.

Manufacturers have several plausible tactics available, according to the researchers. They could develop different formulations of existing medicines, convert existing open discounts into confidential rebates that regulators cannot easily compare, or delay launches in reference countries altogether so that no local price exists for Medicare to benchmark against. Such behaviour would directly affect patients and health systems in the 19 reference countries, potentially delaying access to new therapies or increasing what insurers and governments pay for them. Professor Kerstin Vokinger of ETH Zurich and the University of Zurich, a study author, warned that policies in the United States may impact access to medicines globally and that policymakers should ensure the availability of important medicines is not delayed as a result.

A second major finding concerns the confidential deals that multiple manufacturers have reportedly struck with the Trump administration. An initial group of 17 pharmaceutical companies, including AbbVie, Amgen, AstraZeneca, Bristol-Myers Squibb, Eli Lilly, Gilead, Johnson & Johnson, Novartis, Novo Nordisk, Pfizer, Roche/Genentech and Sanofi, among others, reached separate agreements that reportedly include exemptions from the GLOBE and GUARD rules. These 17 companies account for 131 of the 195 medicines studied, or 67 percent of the sample. If those medicines were excluded from the pricing rules, the researchers estimate the potential savings would shrink by 71 percent, leaving just 3.3 billion dollars, or 28.7 percent, of the original savings, comprising 0.9 billion dollars under GLOBE and 2.4 billion dollars under GUARD.

The picture has shifted further since the analysis was completed. Professor Hwang noted that the latest round of deals announced on 31 August brings the reported tally to 26 companies, and that by an updated estimate, exemptions would push the share of savings lost from 71 percent in the study to nearly 80 percent. Because these agreements are not public, he argued, it is challenging for policymakers and the public to judge whether Most-Favoured-Nation pricing is delivering what was promised. ‘The Trump administration’s Most-Favoured-Nation pricing models have the potential to deliver real savings to the US federal government and taxpayers. But if manufacturers can evade participation in these models by striking side deals, most of those savings might not be realised,’ said Hwang, the study’s lead author.

The geopolitical consequences could be equally significant. ‘Referenced countries, from Germany to Japan to Australia, are facing substantial pressure from the US administration and industry to raise prices and spending on medicines,’ Hwang added. ‘But this is colliding with the reality that other countries have limited budget room to give.’ Study author Professor Aaron Kesselheim, also of Brigham and Women’s Hospital, observed that people living in the United States have long paid more for medicines than virtually anywhere else in the world, and that the Most-Favoured-Nation models were meant to address this gap, but their scope is limited by various exemptions and they will likely face legal challenges.

The authors acknowledge several limitations of the analysis. The estimates rely on modelled Medicare net prices and on international prices drawn from public databases, which may not capture other countries’ confidential discounts. The medicine list, based on historical Medicare data, may not reflect newly approved medicines or future policy changes. The study’s figures are estimates and cannot predict how manufacturers or insurers will actually respond to the new rules, including whether companies will alter their launch or pricing plans in reference countries. The findings are scheduled to be presented at the Nordic Pharmaceutical Forum Summit on 14 September 2026, and the research was funded by Arnold Ventures. Even with those caveats, the study offers one of the first quantitative portraits of how a single US pricing rule, covering a quarter of the world’s largest pharmaceutical market, could ripple through the pricing decisions, launch sequencing and access to medicines that shape health systems on every continent.

Subject of Research: Modelling of US Medicare Most-Favoured-Nation drug pricing and its global pharmaceutical market effects

Article Title: The Lancet: New US Medicare pricing policies could reshape global pharmaceutical markets, potentially driving up prices and delaying medicine launches worldwide, study suggests

Article References: The Lancet: New US Medicare pricing policies could reshape global pharmaceutical markets, potentially driving up prices and delaying medicine launches worldwide, study suggests. (n.d.). Original publication

Image Credits: AI Generated

DOI: Not provided

Keywords: Medicare, Most-Favoured-Nation pricing, drug pricing, pharmaceutical policy, The Lancet, GLOBE, GUARD, reference pricing, medicine launches, health policy, Inflation Reduction Act, global drug markets